Plan to get rid of circular debt on the cards

ISLAMABAD: The Power Division is busy finalising a comprehensive plan to rid the country of circular debt in five years, as Rs30-35 billion is adding to the monstrous debt every month.

The plan will focus on reducing line losses by one percent annually by scaling them down to 13.2 percent from existing 18.2 percent and improving recovery of billed amount [of electricity] by one percent annually from existing 89-90 percent to 95 percent.

“The plan is to be submitted to the Economic Coordination Committee (ECC) in a week,” Joint Secretary Power Zargham Eshaq Khan told The News.

The permissible losses will also be cut down by 3 percent to 13.3 percent, and to this effect the top mandarins of Power Division are making a doable plan to get rid of the monstrous circular debt within five years which has risen to about Rs1.3 trillion.

Another top official of Power Davion told The News that the power sector payables had swollen to over Rs650 billion and if the loans borrowed by the power sector parked in PHPL (Power Holding Private Limited) were included to the payables then the whole circular dent stood at Rs1.3 trillion.

It is pertinent to mention that the commercial banks have already refused to extend credit line of Rs50 billion to partially off-load the circular debt.

Last year, the power sector alone suffered a huge setback of Rs114 billion on account of more than 10 percent loss in recovery of billed amount, the official said.

The system braves over Rs24 billion line losses annually. However, the consumers have been paying over Rs36 billion every year additionally when permission losses in tariff increase to 16.3 percent from 13.2 percent to finance the losses.

According to documents, power of about Rs60-70 billion gets stolen every year. In order to ward off the loss, the power distribution companies (DISCOs) are said to have involved, twice in a year, in sending inflated bills to consumers collecting over Rs35 billion every year.

More importantly, the running defaulters and permanently disconnected consumers have to pay Rs400 billion.

If the government manages to pluck this low hanging fruit, it can easily bring the volume of circular debt down to a reasonable level.

In March 2018, Minister for Power Sardar Awais Leghari launched a drive against overbilling and told the National Assembly that the Multan Electric Power Company (Mepco) had indulged in Rs5.50 billing overbilling.